The present invention relates to providing a computer implemented profit optimization system.
In business and other areas, large quantities of information need to be recorded, processed, and mathematically manipulated to make various determinations. From these determinations, decisions may be made.
For example, in businesses, prices of various products must be set. Such prices may be set with the goal of maximizing margin or demand or for a variety of other objectives. Margin is the difference between total revenue and costs. Total sales revenue is a function of demand and price, where demand is a function of price. Demand may also depend on the day of the week, the time of the year, the price of related products, location of a store, the location of the products within the store, advertising and other promotional activity both current and historical, and various other factors. As a result, the function for forecasting demand may be very complex. Costs may be fixed or variable and may be dependent on sales volume, which in turn depends on demand. As a result, the function for forecasting margin may be very complex. For a chain of stores with tens of thousands of different products, identifying the relevant factors for each product and store, then determining a function representing that demand are difficult. The enormous amount of data that must be processed for such determinations is too cumbersome even when done by computer. Further, the methodologies used to forecast demand and the factors that contribute to it require the utilization of non-obvious, highly sophisticated statistical processes.
Such processes are described in U.S. patent application Ser. No. 09/742,472, entitled IMPUTED VARIABLE GENERATOR, filed Dec. 20, 2000 by Valentine et al., and U.S. patent application Ser. No. 09/741,958, entitled PRICE OPTIMIZATION SYSTEM, filed Dec. 20, 2000 by Venkatraman et al., which both are incorporated by reference for all purposes.
It is desirable to provide an efficient process and methodology for determining the prices of individual products such that margin (or whatever alternative objective) is optimized.